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The rise in e-commerce – challenges with selling online and maintaining customer engagement

Written by Nicola Broadhurst, Gregory Barton on Friday, 16 October 2020. Posted in Legal, Sales & Marketing

Given the impact of COVID-19 to businesses across the UK, it has arguably never been more important for franchised brands to have a strong online presence to engage with its customer base, maintain brand loyalty and generate revenue where it can.

The rise in e-commerce – challenges with selling online and maintaining customer engagement

Given the impact of COVID-19 to businesses across the UK, it has arguably never been more important for franchised brands to have a strong online presence to engage with its customer base, maintain brand loyalty and generate revenue where it can. 

When lock down occurred many franchisors operating in a physical face to face environment with their customers were quick to adapt their offering to an online format (where this was possible). This helped ensure continuing revenues for franchisees as well as presenting new ways of working and potential new franchised formats for the future.  This is particularly true of the children’s sector where families were keen to continue to provide entertainment or education to their children and the online format proved particularly successful. For some franchisors this presented an entirely new way of delivery for others it simply required modification and expansion to existing methods however for most (if not all) who made the adaptation, this was a lifeline as well as providing a competitive advantage over those who were been slower to adapt.

However, operating in the online sphere comes with an additional layer of compliance and regulation and businesses need to ensure that they set up their online presence and sales processes accordingly. E-commerce is becoming increasingly regulated with a shift towards protecting consumers. A failure to comply can trigger customer complaints, an investigation by Trading Standards or the Competition and Markets Authority or the information Commissioner’s office or in the worst case scenario financial (and in some cases criminal) penalties.  

An overview of the some of the key areas which should be considered is set out below.

Information requirements

All businesses must ensure that their website contains the information required by law, for, example:

  • The information contained in the Provision of Services Regulations 2009 and Electronic Commerce Regulations 2002 (e.g. business name, address, contact details for making complaints, legal status (company, partnership etc), VAT registration number); 
  • Where the trader is selling goods or services online, the information contained in the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (CCRs) (e.g. the main characteristics of the goods/services, rights to cancel, the total price of the goods and payment methods) and the rights and obligations of both business and customer under the Consumer Rights Act 2015

Terms and conditions of sale and returns policy

Where a business sells goods/services online, it should include terms and conditions of sale on its website which are brought to the customers’ attention.  This provides certainty to customers and the business and can help provide greater protection for the business than might otherwise be the case under law. 

When drafting terms and conditions of sale these should be drafted in plain, clear and intelligible language, avoid legal terminology and definitions and should not contain any “blacklisted” terms which will automatically be unenforceable. These include terms which exclude or restrict the trader’s liability for providing goods or services of a satisfactory quality or which are fit for purpose and the delivery of goods. 

A business also needs to adopt a suitable cancellation and returns policy which complies with the CCRs. Subject to some exceptions (e.g. made to order goods), consumers generally have a legal right to cancel online orders for goods within 14 days of receipt of goods and orders for services within 14 days from the date after the date the contract is made. However many businesses choose to offer more generous cancellation periods (30 days being a popular choice). Where a service is being offered however which a customer wishes to use immediately there are exceptions to the cancellation rights but, again this needs to be clearly stated and the customer warned that they may lose their right to cancel if they wish to start immediately.  A failure to comply with the CCRs in this regard can mean a customer has up to a year to cancel and receive a refund.  Customers should also be informed of how to place an order, the prices should be inclusive of VAT and their remedies if the goods or services are defective. 

These terms and conditions may need adapting for the franchise network to make it clear that customers are contracting with their local franchisee not head office to help ensure the separation of liability that is key in a franchise relationship is maintained. 

Advertising 

As part of their online presence, businesses will also need to consider the content of their marketing communications, which is regulated in the UK by a combination of legislation. For example, the Unfair Trading Regulations 2008 (UTRs) which prohibit various general advertising practices such as misleading advertising and the Advertising Standards Authority (ASA) codes of practice (which act as a general rule book containing broad principles and themes, such as advertising being decent, honest and truthful). 

Failure to comply with the UTRs may result in enforcement authorities entering the trader’s premises to investigate alleged breaches and seizing offending products and failure to comply with the ASA’s codes of practice could result in the ASA requiring the advertisement to be amended or withdrawn. 

These sanctions can involve a significant amount of wasted expenditure and negative publicity which can have an adverse effect on brand and reputation which is critical to a franchised network. Businesses should therefore ensure that their advertisements comply with the relevant requirements.

Outsourcing to third party suppliers

Given the logistical and financial hurdles involved in e-commerce, many businesses outsource aspects of their online offering to third party suppliers such as payment aggregators (e.g. PayPal and Shopify), delivery providers (such as Deliveroo and Uber Eats) and warehousing/order fulfilment specialists which can provide off the shelf / turnkey solutions to enable businesses to start selling online quickly.

Given the brand and reputational risks in appointing such suppliers, businesses should conduct appropriate due diligence on the supplier and ensure the agreement with that supplier contains relevant contractual protections for the business (such as service level requirements and warranties). It is often difficult to negotiate with the larger providers but this does not mean some additional protections cannot be agreed and where a franchisor is negotiating on behalf of the network the volumes of orders will often provide good commercial bargaining power.  Franchise agreements also need to be considered to ensure that the franchisors can require the franchisees to adopt the new platform providers or suppliers in the operation of their business. 

Data protection

Businesses that use their website to process personal data will also have to comply with data protection law, including the General Data Protection Regulation 2016 (GDPR), Data Protection Act 2018 (DPA) and the Privacy and Electronic Communication Regulations (PECR). Some of the key issues are highlighted below. 

Businesses will need an up to date privacy notice on their website which contains all the information required by the GDPR and the DPA to inform users of the website and customers as to how their personal data will be processed, shared and held together with their rights.  Again this will need adapting for a franchised network. 

Where the website uses cookies, for example to analyse user behaviour, explicit consent from the user will be required. In order for this consent to be valid a cookie notice should be used to break down the purposes of the cookies into categories (e.g. cookies necessary for the site to operate and analytics cookies) and give the user the opportunity to provide consent for the different categories. Only essential cookies (i.e. those which are strictly necessary for the site to operate) can be pre-ticked (the others need opt in consent). A cookies policy is also required to provide more detail about the use of cookies.  

In relation to electronic marketing lists, unless the “soft opt-in” applies, a trader must usually obtain the consumer’s freely given, specific and informed consent to marketing e-mails, which most traders do by including an opt-in marketing tick box on their website which must be ticked by the consumer (and cannot be pre-ticked). Traders can only use the “soft opt-in” where they do not have the consent of the consumer but have a legitimate interest to market to that customer such as where the consumer has bought (or negotiated to buy) a similar product in the recent past and the trader gave the consumer a simple way to opt out of such communications, both when the order was placed and in every subsequent marketing communication.

As we enter a period where new restrictions are being implemented, it remains to be seen whether the ways in which consumers purchase and consume products during the COVID-19 pandemic will continue in their current form going forward. One thing that is clear is that the trend towards online selling is only likely to become more and more relevant in the future and the legal focus is still remaining firmly in favour of protecting consumers.


About the Author

Nicola Broadhurst

Nicola Broadhurst

Nicola is head of the franchising and retail practice at Stevens & Bolton. She is an acknowledged legal expert in the franchise sector, providing the full range of advice to franchisors and franchisees. Nicola also regularly advises clients on their choice of expansion method including template agreements to help standardise relationships, customer services issues and advertising and marketing compliance.
Gregory Barton

Gregory Barton

Gregory is a lawyer in the franchising and retail practice at Stevens & Bolton. He specialises in a range of commercial work, in particular advising clients in the FMCG sector on a broad range of matters including product supply and sponsorship deals and business to consumer e-commerce transactions. Gregory has over a decade's experience in the legal sector, including a one year client secondment as UK Legal Counsel with an FMCG company.

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